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Senate Tax Relief Package Promotes Growth, Rewards Fiscal Irresponsibility, and Increases Taxes

For Immediate Release. May 19, 2003The Senate, on May 15, 2003, passed the Jobs and Growth Tax Act of 2003 (S.2) by a 51-49 vote that provides $350 billion of tax relief over ten years.   The measure would reduce the tax individuals pay on dividend income for 2003 by 50 percent and eliminate it from 2004 to 2006.  (However, the tax would be reinstated in 2007)  Also, $20 billion in aid is included in this bill for the states.  Of this money allocated to the states, 50 percent is for Medicaid.  To spur business investment the Senate measure adopted the House’s provision allowing small businesses to offset capital expenses by allowing them to deduct up to $100,000 annually for the next five years. The tax credit for each child would be increased from the current $600 to $1,000.  The income tax reductions would be accelerated just as they were in the House plan, but the Senate measure does not go as far as the House bill on the marriage penalty.  And from high user fees and closing existing tax relief, the Senate increased taxes by $92 billion.  For example, the bill eliminates the law that allows American workers overseas the exemption of  $80,000 of their income from taxation.   

The Senate should be commended for their effort for eliminating the unfair double taxation on dividend income.  However, the temporary suspension or sunset of the tax does not address the problem with this unfair tax.  “The strategy that the Senate Republican’s have taken on eliminating the tax on dividends is bold,” said Dr. Joel P. Rutkowski, president of the American Voice Institute of Public Policy.  “It is their hope that the reduction and then the temporary elimination of the taxation on dividends will start to stimulate the economy and create an economic environment that will cause businesses to hire employees.  Once their premise is valid that tax relief promotes economic growth, they can then encourage voters to elect more Republicans that believe in pro-growth tax policy, so they can continue to provide more tax relief to the hard-working and overtaxed American worker,” added Dr. Rutkowski. 

On the other hand, the Senate measure rewards states for their fiscal irresponsibility by providing $20 billion in new spending.  Federal tax dollars should not be used to foster states’ spending sprees.  States have been complaining that they are facing the deepest fiscal crisis since the Second World War.  Yet the latest Commerce Department data demonstrates that, compared to the same period last year, revenues have increased in the first three months by 5.4 percent.  Furthermore, by increasing outlays by six percent they have spent that, and this is spending in addition to a 13.4 percent increase between 2000 and 2002.   

Finally, it is wrong for the Senate to shift the tax burden from one group to the other that will do nothing to stimulate the economy.  If the Senate truly wanted to stimulate the economy they would stop using the same old excuse of how will we pay for this tax relief package.  “Senators, as well as Congressmen, routinely suffer from memory lapses that it is not their money but the hard earned tax dollars of the American worker that are being taken. And if they would stop overspending on wasteful federal programs, they could easily return the taxpayers’ money back to them through real and pro-growth tax relief,” said Dr. Joel P. Rutkowski. 

For Interviews Contact:

Joel P. Rutkowski, P.h.D.
President, The American Voice Institute Of Public Policy

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